Locking Horns: foreign investment in Australian farming

Foreign ownership is bound to stir up emotions no matter what the context. But when you add to the mix the idea of dinky-di, Aussie family farms being bought up by state-owned or state-backed foreign companies, then it can all become too hot to handle.

But behind it all is one, simple question: does foreign ownership of Australian farms pose a security threat? A food-security threat, an economic threat... or any type of threat at all?

These are questions currently being examined by the Senate Rural Affairs Committee.

In Locking Horns this week we ask our panel about selling the farm to foreigners: is it a real threat or Hansonism?

Transcript

Jonathan Green: Foreign ownership, something which is bound to stir up emotions no matter what the context, but when you add into that mix the idea of dinky-di Aussie family farms being bought up by state-owned or state-backed foreign companies, it all becomes rather politically hot—maybe too hot to handle.

But behind it all is one simple question: Does foreign ownership of Australian farmland pose a security threat, or a food security threat, or an economic threat, or any type of threat at all?

These are the questions currently being examined by the Senate Rural Affairs Committee. Now, Liberal senator Bill Heffernan is the committee’s chairman. Senator Heffernan, good morning. Does foreign ownership of Australian farms concern you?

Bill Heffernan: Look, the first thing we’ve got to do is understand—and good morning to your listeners, by the way—the first thing we’ve got to understand: What is the issue? What we’ve got to come to terms with, and bear in mind that most governments and most politicians plan the future on the outcome of the next election, based on the history of the past, we’ve got to plan Australia’s future based on where we think we’re going to be in 50 years time and where the rest of the planet’s going to be in 50 years time.

So the three big issues. With modern communications and transport, we’ve got to figure what that does to sovereignty and sovereignty as we’ve known it, or based on the history of the past versus the future, we’ve got to understand that in the future, given modern communications and transport and free trade agreements, et cetera, that the concept of sovereignty has changed; that because of modern science—and we’re basing the future on science rather than the history of the past—the science is saying, and all science says vaguely, that by 2050 we will have nine billion people on the planet, that…

Jonathan Green: Can I just ask you, this issue of sovereignty, is the acquisition of Australian farming land, is that impinging on our sovereignty over that property and what it produces?

Bill Heffernan: Well, the issue of sovereignty—it’s impossible during 10 minutes in radio—but what we’ve got now, and the ABS, the Australian Bureau of Statistics, recognises this, that the concept of sovereignty is changing, because of sovereign wealth funds. And Canada and places like that are facing up to this. Where once upon a time—and I’m not opposed to, by the way, foreign investment in agriculture: what concerns me is the unregulated entry of other countries acquiring our sovereign assets with the regulations that we presently have that allow them to exclude it from our tax system, supply and demand, distort the market, everything down to local rates.

I mean, these are serious problems that we haven’t thought about. The rest of the world is thinking about it. China recognises that by 2070 it will have to feed half its population—barring human catastrophe of about two billion people—half its people will have to be fed from someone else’s agriculture resource. They’re onto it and they’re doing something about it and we’re asleep at the wheel.

Jonathan Green: What do you mean distorting the market? What’s the instance there?

Bill Heffernan: Well, if you go into Chenoa—which by the way didn’t come into the ABC survey because it wasn’t based on an ABN number, and I can go through the fraud and the flawed content of the ABARE’s report but not enough time today—what I’m saying is if you’re prepared as a miner to pay three or four times the value of a farm to shut the farmer up, which they’ve done to 40 farms around Chenoa site there in Gunnedah, that in turn reflects, based on the valuer general’s values, a new value for the farms, which then reflects on the rating base, because you pay more rates.

The whole thing can be distorted and this was proved in the Sydney home market where the Foreign Investment Review Board had to actually alter the rules, because they were distorting the home market.

Jonathan Green: But that’s good for the individual farmer that’s selling, though.

Bill Heffernan: You can’t complain about the farmer that wants to get out, but you can complain about the greatest… the threat to… I mean, you can’t do this unless you look at the future. And what we’re looking at is not a quick exit, and you can’t blame the farmer that wants to get out, but the farmer that wants to stay in and produce food that’s affordable from an environment that’s sustainable, and a market that’s real, you absolutely have to make sure that you don’t distort these things.

And I have to say that the concept of sovereignty, other sovereign nations acquiring our sovereign assets and excluding us from access to them, I absolutely think we have to think this through. As I say, traditionally foreign investment in Australia’s been a good thing, because the best thing about foreign investment, corporate foreign investment in agriculture, is they usually after 20 years go home broke, and we get the benefit of their spend. But this is a different concept now and to see it in the correct light you have to see where the world’s going to be.

And when I was—you didn’t hear me before—what I was saying, we’ve got to plan how we deal with not only changing climate—and southern Australia’s destined to dry out according to the science—but we’ve got to deal with the fact that people are living longer; the global protein task is not going to be met with meat, it’s going to be met with fish in the future; 2050 says we’re going to have nine billion people; 50 per cent of the world’s population poor for water; 30 per cent of the productive land of Asia gone out of production; two-thirds of the world’s population living there; the food task doubling; and up to 1.6 billion people on the planet displaced.

Now, we have to understand where that’s going to take us. What we’ve got to do is model where we are now. And we do not have the information. I can assure you, I’ll prove that in this committee. And I’m not going to pre-empt the findings of the committee but I am going to highlight the problems we face. But if we are to… we’ve got to model where we are then we’ve got to make that model go out 50 years and say to ourselves, ‘Is that where we want to be in 50 years time?’

Because what we’re doing now will take us back for family farming—one of the great institutions—to a concept of tenant farmers, or serf farming. Because if you allow a non-market currency, such as China, or a place like Qatar, or all these countries that have huge wealth, but a huge food problem based on where they’re going to be in the future, if we allow them to distort the market for production and take us out of the market, we’re going to be in serious problems…

Jonathan Green: Now, most people would be looking for some sort of intervention in that process from government. And presumably the instrument would be the Foreign Investment Review Board. What’s happening or not happening as far as the Foreign Investment Review Board is concerned?

Bill Heffernan: At the present time the Foreign Investment Review Board, who haven’t appeared at the inquiry because they say they’re an advisory body, but I intend to, if needs be, subpoena them, what they’re doing now—and I’m grateful for the present treasurer, Mr Swan, to allow his staff and Treasury to come round to my office to look at some of the Foreign Investment Review Board national interest tests—in fact, the national interest test, the ultimate test for the Foreign Investment Review Board—which has never been triggered, by the way, in agriculture because we’ve got a $231 million trigger—it really is just a half a dozen phone calls and it’s political cover for the minister of the day and the government of the day. If there doesn’t appear to be any problems by surveying people of an interested party, there’s no model for it…

Jonathan Green: How should that test work, Senator Heffernan?

Bill Heffernan: Well, I absolutely think, the first thing, it won’t work till you work out where Australia is now, where it’s going to fit into the world in the future, how do we model a world with 12 billion people by 2070, how do we model the fact that China… for instance, China has set aside 10 years ago 200 million hectares, which is 18 times the size of the Cape York Peninsula, which we’ve locked up for a good feeling as a World Heritage area, they set aside 200 million hectares, they’ve already lost 10 per cent of that land, their agriculture land, due just to urbanisation. I mean, this is a serious problem and we’ve got to model what the world’s going to look like in the future.

Most politicians—and I can assure you there’s no politician I’ve met knows the answer to any of this—most of them, as they are, and as Campbell Newman just said, are interested in the next election. I mean, you know, I won’t go into the cold stream gas thing in Queensland, but that’s absurd what they’ve done up there against the environmental background and that was political convenience.

But we’ve got to absolutely get politicians to worry about where Australia’s going to be in 50 years time, because I can assure your listeners that what we’ve known as the concept of sovereignty, due to modern communications and transport and a whole lot of other things, is changing. I mean, it used to take six weeks for the English… for our team to get to England to play cricket once on a ship—we go there overnight now.

Jonathan Green: Bill Heffernan, thank you for your insights there.

You’re listening to Sunday Extra on Radio National. And we’re talking foreign investment in agriculture and rural land. Now, you can join that conversation through Twitter @RNSundayExtra or via text 0418 226 576.

And we’re going to push on with it ourselves. Listening in to Senator Heffernan there were Paul Barratt, a former secretary of the Department of Primary Industries and Energy, and a public servant who’s had a long-standing involvement in foreign investment policy. Also on the line, Stephen Kirchner, a senior lecturer in economics at UTS Business School and a research fellow with the Centre for Independent Studies.

Paul Barratt, is Senator Heffernan right? Is the whole notion of sovereignty sort of shifting under our feet here?

Paul Barratt: The great structure of international treaties is amending the way we choose to use our sovereignty, but I think we still rely on a traditional model of sovereignty, and rightly so. Every foreign government-owned enterprise that buys land for any purpose in Australia is not able to act in a sovereign way in Australia. It’s completely subject to Australian government law, to state law, and to local government law.

Now when Senator Heffernan refers to distorting the market by paying a farmer at Gunnedah three or four times what his farm is worth, clearly the Chinese coal company is interested in the value of the coal under the ground and values that much more highly than the value of production on the surface. That’s just conventional economics.

Now the state government actually has it in its control to say what the value of that land is, because if they say there will be no mining of coal from under the Liverpool Plains, then the value of that land is its value for agricultural purposes.

Jonathan Green: And this is where we get ourselves into a pickle, isn’t it? That we’re letting the market run here, we’re keen for the development of the energy resources at the expense of the farming…

Paul Barratt: Correct.

Jonathan Green: …but on top of that we have this new concept of the buyer not being private individuals but state-run entities. Isn’t that the issue that gives it this sort of political difficulty?

Paul Barratt: But they have no state power in Australia, and so the real question is their market power. Now, huge United States private combines like agricultural enterprises like Cargill have enormous power in the market as well, and Japanese trading companies work very closely with Japanese government, so to get wrapped around the axels on the fact that a particular enterprise belongs to a government, and another one simply makes huge donations to the Republican Party, and a third one simply does what the government tells us, I don’t see there’s a huge distinction there, frankly.

Jonathan Green: What’s your take there, Stephen Kirchner? I think your view would be that the market should run its course?

Stephen Kirchner: Well I think you have to remember that we have very robust regulatory frameworks for both business investment and land use in Australia. And these frameworks apply regardless of ownership. And the Foreign Acquisitions and Takeovers Act, and the Foreign Investment Review Board are really not adding anything to that process other than providing an avenue for ministerial interference in the market for ownership and control of equity capital. And I think this interference is actually contrary to the rule of law. And it’s not actually adding anything to the way in which we go about regulating foreign investment.

So, for example, of the extent that competition issues might arise, the ACCC can scrutinise that; it’s not reliant on the Foreign Acquisitions and Takeovers Act in order to give effect to that scrutiny. In terms of transfer pricing, the Australian Taxation Office has extensive powers to look at those issues. And so what I’m saying is that we shouldn’t be regulating foreign direct investment at the border. What we should do is we should regulate it in-country, we should extend national treatment to foreign investment, and that should apply on a non-discriminatory basis.

Jonathan Green: And how do we sort the sort of issue that we see particularly in Queensland of agricultural land being taken up in great quantity for resource use? I mean, is this… how do we marry those sort of short-term needs against perhaps the longer term need for good rural industry and food production?

Stephen Kirchner: Well, I think that’s more of a land use issue than a foreign direct investment issue.

Jonathan Green: Can we regulate that sort of issue, though?

Stephen Kirchner: Well, we do. And I think the problem here is that both agricultural goods prices and mineral prices are going up, and so you’re going to see competition for land to the extent that there’s competing uses for that land. Now, there may be cases for changing the way in which we regulate land use, but I think that’s a separate question from how we go about regulating foreign direct investment. Because if you change the way you regulate land use, then those changes apply to any investor in Australia, regardless of whether they’re domestic or foreign.

Jonathan Green: Paul Barratt, what’s your take on this food security discussion? Should we admit that we’re in a global food marketplace?

Paul Barratt: Oh, we’ve always been in a global food marketplace; we’ve always exported more of our food than we’ve consumed locally. We are a relatively rare beast in being a net exporter of food. So we’ve always acted in a global market. The question of food security is a question ultimately of—I agree with Senator Heffernan; we’ve got to look for 50 years ahead, but it’s a question then of food production, and that comes back to what Stephen’s saying: this is a land use question, not a foreign investment question.

Would we be happier if a private Australian coal company was buying up all the land on the Liverpool Plains? The question is to what use do we ascribe the Liverpool Plains: production of food and fibre, or production of coal, or some combination of the two? That’s a decision that’s completely within our power. And also, Australian government has absolute power to regulate exports. So if there are ever any questions of food security for the Australian public, the Australian government has all the power that it needs. So the fact that a foreign government might own a farm doesn’t mean it has automatic power to export the food that’s produced there.

Jonathan Green: There’s a risk though, isn’t there Stephen Kirchner, the response politically might be driven by a sort of a Hansonite anxiety, if you like?

Stephen Kirchner: I think there is a temptation for politicians to stir up xenophobic sentiment in relation to this issue, and I think some people in the media are guilty of this as well. But I don’t think Senator Heffernan is doing any favours to Australian farmers by proposing to restrict the number of potential buyers for their farms, because in doing that what he’s effectively doing is devaluing the equity that they’ve built up in that farm and denying them the opportunity to sell it to the highest bidder and to take the proceeds from that sale and either reinvest it somewhere else in the agricultural sector or in some other activity.

And I think there are a lot of farmers who are angry with politicians for trying to interfere in those transactions and I think there are a lot of farmers who are also angry at the NFF over this.

Paul Barratt: Yes, well, I remain… I’m very firmly of the view that it is for the government of the day to determine the national interest and not for anyone else to try to prescribe what the national interest might be.

Jonathan Green: Sounds eminently sensible. Paul Barratt and Stephen Kirchner, thank you both very much for your time this morning.

Guests

Senator Bill Heffernan

Liberal Senator for New South Wales and Chairman of the Senate Rural Affairs Committee

Stephen Kirchner

Senior Lecturer in Economics at UTS Business School and Research Fellow with the Centre for Independent Studies